A Booster Shot for Gay-Owned Businesses

GLBT certification from the National Gay & Lesbian Chamber of Commerce is "a channel to business opportunity"

Jeremy Quittner

December 4, 2009, 8:00 PM EST

With only three employees and $1 million in sales, New York advertising agency Double Platinum faced a challenge convincing its largest clients that it could handle their biggest jobs. But in 2005, after being certified by the National Gay & Lesbian Chamber of Commerce as gay- and lesbian-owned, the agency has found some unexpected openings. Over the past four years, the certification has helped Double Platinum win $650,000 in contracts from large companies that have quietly expanded their diversity supplier programs to include gay-, lesbian-, bisexual-, and transgender (GLBT)-owned companies. The certification, says Stephanie

Blackwood, who co-founded the company with Arthur Korant, is "no guarantee of business. "It is a channel to business opportunity, that's all."

Blackwood says the certification has given her an entree to companies that want to market to the gay and lesbian community—a specialty of hers—or want to reflect more accurately the diversity of their own employees in their supplier base. Through such diversity programs, she's worked with companies including Continental Airlines, IBM, and Dutch bank ING.

M.V. Lee Badgett, an economist at the University of Massachusetts at Amherst and research director at the Williams Institute, a Los Angeles think tank, specializes in economic and policy issues affecting GLBT people. She says discrimination affects the formation of new businesses in ways big and small. It's well known, for instance, that the potential to lose one's health insurance is a major stumbling block for those who consider leaving a corporate job to become an entrepreneur. Yet in many cases, gays and lesbians have no access to health care through their partners and, unlike married heterosexual couples, are taxed for such benefits when they are eligible. Badgett's research indicates gay men and lesbians tend to earn less than their straight counterparts, making it harder to save startup capital. Getting the experience necessary to become an entrepreneur can be harder, too: In many states, it's still legal to fire someone for being gay.

Certification for gay- and lesbian-owned businesses is only five years old. So far, 50 large companies, including Continental, Merck, UPS, and Wells Fargo, have partnered with the NGLCC to use GLBT companies as suppliers. The NGLCC says there are approximately 1.4 million GLBT-owned businesses in the U.S., and estimates those businesses have won about $50 million in corporate contracts over the last two years. But only about 250 of these businesses have been certified by the chamber.

Such certification is only of use in dealing with private companies, as GLBT-owned companies don't have minority status on federal contracting opportunities. Advocates for GLBT businesses are hoping that an executive order, similar to the one that established contracting goals for women-owned businesses in 2000, could change that. The NGLCC says it has talks scheduled with the White House Office of Public Engagement in the next few months. Preliminary, informal talks have been positive, says Justin Nelson, president and co-founder of the NGLCC. "The federal government does not track spending or set goals with GLBT suppliers," he says. "That is what we want to accomplish with the executive order."

big blue pioneer

IBM was the first large company to include GLBT businesses in its supplier diversity program. Irwin Drucker, director of IBM's GLBT Diversity Supplier program, remembers attending an internal supplier diversity event in 1999 where executives praised IBM for its work with women and ethnic minorities. "We were spending at least $1 billion with [other] diverse-owned businesses," he says. "I sat there thinking: 'I am an out and proud executive. Why not include GLBT in our diversity supplier program?'" It was almost that easy: Drucker approached his manager at that same meeting, and 10 minutes later, the manager made a formal announcement that IBM would include GLBT suppliers in its diversity program.

For five years, no other company followed IBM's lead. At the time, there was no agency that certified GLBT businesses, so IBM did it itself.

Over the past 10 years, IBM has worked with more than 50 GLBT-owned companies, for contracts worth more than $25 million, says Drucker. The company aims to have at least one diversity supplier engaged in each request for proposal.

The NGLCC models its certification process, which costs business owners about $300, on those used by the Women's Business Enterprise National Council (with which it has an agreement that makes dual certification less onerous) and the National Minority Supplier Development Council. The first hurdle is to verify that the company is at least 51%-owned by a minority, and the second is to prove that the business owner is the minority he or she claims to be. "We had to think outside of the box: What are tangible ways to tie the applicant to GLBT status?" says Nelson. In addition to site visits, the NGLCC asks for documentation that might show domestic partnerships, civil union or marriage of the principal, awards from GLBT organizations, or, in the case of transgender individuals, surgical records.

For 13-person, $5 million employee performance consulting firm Neil Cerbone Associates in South Orange, N.J., it took one staff person about an hour a day for a month to get the required documents together. Besides hosting an on-site visit to prove that it was fully functional, the company needed to produce letters of recommendation from three clients testifying to the quality of its work and that Neil Cerbone, the owner, is gay. "If there is someone who owned a business and is gay, and the clients did not know this, it would be difficult," Cerbone says. That's a problem on the corporate side as well. "The biggest challenge in finding qualified, diverse suppliers unfortunately is that many business owners are reluctant to come out," says Drucker.

Cerbone says the certification, which he got in 2007, hasn't led to any work yet, but it has led to talks with procurement executives at Wells Fargo Bank, and networking opportunities with other large companies that participate in the program. "It is a long process and we are not disillusioned," Cerbone says. He reminds other GLBT-owned companies that networking with procurement executives does not in itself produce business, even though it does open doors to those who can award contracts. That may be only a small step, but it is, at least, a step.

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